In 20 years in the oil business I had never heard of the company. Yet, here was Eskom’s procurement department, recommending that we award them a fuel oil tender to the tune of R432m. It stank to high heaven.
I first noticed the company during a meeting of the board of Eskom’s generation division in April 2022. Looking at the bidders’ list submitted by the procurement department, I quickly realised it was nothing more than a shelf company, and a close corporation to boot.
Another company on the list was also distinctly dodgy: a quick Google search revealed that they were under US sanctions from the Office of Foreign Assets Control — or OFAC, which precipitated a suitably onomatopoeic moment.
After some discussion, Mel Govender, group executive for legal and compliance, suggested that we conduct a due diligence on the suppliers to ensure there was nothing untoward about any of them. The OFAC-sanctioned firm was eliminated, and a legal firm was appointed to do a thorough due diligence on the remaining bidders.
In the run-up to the next board meeting, I noticed that the due diligence report on the unknown shelf company was not part of the board documents. I repeatedly had to ask for it to be sent to me.
On the morning of the board meeting, I was finally sent the report, which was protected by a password. More angry e-mails followed, and the password eventually arrived in the nick of time.
The voluminous report was sent belatedly, clearly in the hope that I would not have time to read the documents before the meeting. But I paged directly to the key section, and it became clear what was happening.
Load-shedding was not a coincidence. Apart from poor maintenance and management, corruption and other crimes were conspiring to keep the performance of the plants in the doldrums
Chairing the board meeting, I welcomed the three procurement officials presenting the tender award document, and innocently asked them if the due diligence had revealed anything untoward.
“Well,” one of them said after some thoughtful consideration, “there was a possible conflict of interest with a Sasol director, which we were able to resolve.”
I asked about the shelf company. “Anything to be concerned about?” I asked, feigning ignorance.
“Nothing at all, they are good,” was the response.
One of the key requirements of a successful cross-examination is to know the answers to the questions that you’re going to ask, and then pay out enough rope for the witness to hang himself.
“Interesting that you say that, since this is a one-man close corporation. The proprietor has had his car repossessed for failing to pay his instalments, and he is behind on his payments for his house. Do you think he is a good counterparty?” I asked, very calmly.
“Can he afford to pay his suppliers? Can he finance working capital for our payment terms?”
“We have no problem with this company — we do business with companies like this all the time for SD&L [supplier development and localisation] purposes,” was the glib response, hiding behind the facade of empowerment.
“So, when I looked on Google Earth at the company’s address” — startled looks of alarm — “it is clear that he operates from a suburban house in Alberton. I don’t see any fuel oil tanks. Did we do a technical due diligence to confirm?”
“Yes, they completed a form that said they had access to tanks.” There was some perspiration beading on furrowed brows by now.
“And you visited these tanks?”
Muttering and obfuscation made it clear that no company visit had taken place, that the due diligence report had been ignored and that our one-man show was a stalking horse for another supplier, lurking in the background.
“So what conclusion am I to draw from this?” My tone had by now become angrily sarcastic. “This is clearly a company with no substance, no facilities, no finance and no credibility, acting as an intermediary for someone else. Is this a case of monumental incompetence, or is this merely a precursor to corruption?”
After this exchange, the recommendation to award the contract was rejected by the board, and the three officials were suspended, one resigning with immediate effect, saying that Eskom was no longer “a safe space”.
At the heart of the problem lies our government’s devotion to discredited Marxist principles — and especially the Marxist view of the world in terms of class differentiation and the distribution of wealth
********
Stopping the rot of tender corruption was only one way of sorting out Eskom’s problems. In May 2022, after the reintroduction of load-shedding, I spoke to Pravin Gordhan about what we could do about it.
'I told him that we had to bring back experienced managers, which was code for white managers when one spoke to government.
Two-and-a-half years earlier, shortly after I took office, I’d received a touching letter from 72 Eskom pensioners, who had held a meeting and were willing to come back to work, saying they wanted to do their bit to help solve the energy crisis.
When I responded positively, it created a political firestorm. The EFF went ballistic and labelled me a racist. No sooner has a white man taken over than he’s bringing back the old white people, they complained. Pravin Gordhan had no stomach for this fight and instructed me to reject the pensioners’ offer.
Now, in May 2022, it was interesting to hear the minister of public enterprises singing a different tune.
“You must do what is needed,” he responded.
After being afraid of the political fallout in January 2020, the minister was now essentially saying: So what if the EFF throw their toys?
During the same conversation, I lifted the lid slightly on what the private investigators had uncovered. “The problem is Mpumalanga,” I told him. “The corruption and the syndicated crime networks run very deep there.”
I paused and looked at him, before continuing: “And it goes very high.”
Without saying anything, he looked me straight in the eye and nodded.
That same Friday evening, he called and asked me to come to his house in Pretoria at noon the following day. While I was on the way, he sent me a WhatsApp.
“Please let your driver drop you off, don’t park in front of my house,” the message read, with the implication that we might be watched.
The minister lived in a relatively modest suburban home in Groenkloof. I went in and introduced myself to Phindile Baleni, director-general in the Presidency, who would also be attending.
We sat there with our masks on, as we knew the minister was not in good health and had reason to be concerned about Covid-19. Even with a cold front, the windows were open to get fresh air filtering through.
Gordhan ushered me to a particular corner on his couch to maintain maximum social distancing between the three of us. After introductions, his wife offered us some coffee and tea (being a good Afrikaans boy, I took the tray from the lady), and some excellent samoosas.
After instructing us to switch off our phones, Gordhan took them to an adjacent room and put them next to the television, with the sound on loud.
I told him of the sabotage and schemes that Eskom’s security team and the private investigators had uncovered. Load-shedding was not a coincidence.
Apart from poor maintenance and management, corruption and other crimes were conspiring to keep the performance of the plants in the doldrums.
“This is an orchestrated campaign,” I said. “This is a low-grade war we are engaged in, and we get no support.”
I told Gordhan there was more than one mafia-type network still active inside Eskom. At one stage, no fewer than five of the 16 power station managers had allegedly been compromised. It’s impossible to turn a utility company around if you cannot trust the general managers of your own stations.
I also spoke about the resistance we were meeting in government circles, even in National Treasury. Gordhan, as a former minister of finance, was somewhat protective of his old department.
“Treasury?!” he asked querulously.
I told him there was a bureaucrat in Treasury who had supplied false information in a letter that Dondo Mogajane, the director-general of Treasury, had signed. The letter concerned the appointment of a contractor to install coal-unloading equipment at the Majuba power plant’s railway line.
The Treasury official had alleged that the contractor was blacklisted by the auditor-general, but when we contacted the AG’s office, they made it clear that they had done no such thing. I informed Mogajane, who was very apologetic but took no action against the official.
“Give me a name, give me a name!” Gordhan demanded.
I duly supplied a name.
'Give me a name, give me a name!' Gordhan demanded
Before Gordhan could answer, Baleni said: “Oh, I know them. During the PPE procurement for Covid, they tried to intervene and tried to push through a transaction that we had to stop because it was clearly irregular.”
This was quite the revelation, especially in one of the departments generally thought to be immune to the travails of state capture.
Baleni said they often investigated key figures in government and state-owned enterprises with the help of the State Security Agency.
She smiled over the rim of her glasses and said: “We investigated current management. And you’re clean.”
“Thanks very much for that!” I replied.
We spoke about all the stumbling blocks to solving the energy crisis. We spoke about minister Gwede Mantashe who went on eNCA and claimed we had capacity for 15,000 additional megawatts that we were choosing not to use, possibly because my team and I were “intent on subverting the state”.
These were extraordinary claims, made either because Mantashe had no understanding of the issues involved, or because he was cynically intent on scoring political points. This made life very difficult for Gordhan, who as a disciplined party member refrained from public criticism of his colleagues, except in the most oblique comments.
The president did little to discipline wayward ministers, who greatly contributed to doubts among foreign investors and lenders that South Africa had a grip on the electricity crisis.
We spoke about industrial policy and how minister Ebrahim Patel’s myopic regulations were discouraging investment in South Africa. There were many examples, but on this occasion I chose to focus on the production of components for renewable energy.
South Africa has only one locally owned manufacturer of solar panels, with the rest being imported, mostly from China.
The maximum yearly capacity of this manufacturer is 325MW worth of solar panels.
Because this procurement is done through the Independent Power Producers Procurement Programme Office, a part of the department of mineral resources and energy, all bidders are required to abide by Patel’s local content requirements. That means it’ll take this company 20 years to make all the solar panels for Bid Window 6 in the procurement programme for renewable energy.
The local content requirement is intended to attract more investment, but after so many manufacturers were left high and dry when the IPP programme stalled under [Matshela] Koko and [Popo] Molefe, no-one is prepared to return, especially since China is outcompeting the rest of the world.
Rather than solving the country’s urgent need for more generation capacity, Patel wants to promote local manufacturing where there is little or no capacity, and where investor appetite is low to non-existent.
And because local manufacturers are destined to be more expensive when compared to imports, you are baking in higher electricity costs for every electricity consumer in South Africa, making the rest of your economy even less competitive. When your policy is this short-sighted, you’re not truly willing to solve the energy crisis. We’re losing many more job opportunities than we’re protecting with these kinds of regulations …
In South Africa we are prone to “policy creep”. We are forever loading more and more requirements onto a specific policy.
We want to solve the energy crisis, but then we also want to protect local industry, we want to promote BEE, we want to give opportunities to women, the youth and people with disabilities.
I told Gordhan and Baleni we were like a mountain climber who loads up his backpack with nifty gadgets before going on an expedition.
Individually, none of these gadgets is heavy and each one has something to recommend it, but when you put them all together, you stumble out of your tent with a backpack weighing 45kg. It can get so heavy that you fail to reach your destination at all.
At the heart of the problem lies our government’s devotion to discredited Marxist principles — and especially the Marxist view of the world in terms of class differentiation and the distribution of wealth.
At the Union Buildings in Pretoria, yellow lines and a wheelchair icon demarcate the parking spaces reserved for people with disabilities. Perhaps we also need bays marked with red lines and the hammer and sickle — so that those with ideological handicaps can find a parking space close to their office.
The ANC is a party stuck in the past. Guys, it’s the 21st century; why are you still addressing each other as comrade? Your ideology has been completely discredited. Yet you bow before the great gods of Marx and Lenin.
Gordhan, a former communist himself, strikes me as a man with integrity. But he also comes across as someone with the cynicism of the disillusioned believer, one who has realised that the ideology in which he believed his whole life, and which he fought for, has been revealed as a chimera. I think that takes a toll.
For the bravery he displayed in taking on president Jacob Zuma and his cronies, Gordhan deserves the nation’s thanks. But it’s difficult to escape the conclusion that he is being hamstrung by his loyalty to the ANC. He knows something is amiss, but after more than 50 years in the struggle, it’s not easy to admit.
But more important than the ideological jousting between me and the minister was the point I wanted to drive home about the lack of support Eskom was receiving from law enforcement. It took scarcely two weeks after the meeting with Gordhan for my arguments to be reinforced in stunning fashion.
Gordhan strikes me as a man with integrity. But he also comes across as someone with the cynicism of the disillusioned believer
Early in June 2022, I attended a meeting at the Union Buildings with the presidential task team under the chairmanship of deputy president David Mabuza.
The room was a rotunda with beautiful sculptures and panelling, but it also showed signs of decay. Water damage stains dotted the walls.
The PA system didn’t work, so someone sat there with a boombox connected to a microphone to make sure everyone could hear.
All the ministers attended virtually; the minions were there in person. Following my briefing, Gordhan made a strong plea for greater protection of Eskom infrastructure, specifically our power stations, and asked for the support of the police.
Next to me sat Maj-Gen Pushkin Skhosana, who is responsible for national key points, which include Eskom’s power stations.
Skhosana proceeded with a presentation that left me flabbergasted. He said the issue of guarding national key points was actually very simple. The owner of the national key points must safeguard their assets to the satisfaction of the commissioner. If you don’t take those steps, it’s your problem, and then the commissioner will talk to you until you do it. In effect, he was saying: “Listen guys, you must sort out your own shit.”
I texted Gordhan about the puzzling presentation. He agreed it was unacceptable, and promised to talk to the security cluster. Soon the wheels began turning.
That Friday afternoon, I received a call from Karen Pillay, our security chief, saying that Gen Fannie Masemola, the national police commissioner, had requested an urgent meeting the following day at Megawatt Park. I, of course, welcomed the chance to have a discussion following the concerning events at the Union Buildings.
On the Saturday, Masemola arrived with Skhosana and several other senior police officers, as well as three senior members of the State Security Agency. From Eskom’s side, it was Karen, Jan Oberholzer, head of legal Mel Govender, and me.
I told Masemola of the criminality and corruption crippling Eskom. He said he had been contacted by the Presidency, and that he took notice of the sabotage with which Eskom was dealing. He bemoaned the general lack of crime intelligence at his disposal, a stunning admission for the national police commissioner to make.
Thanks to the private investigation, I was sitting on more actionable intelligence than the country’s police chief. I tried to give them a primer on corruption in the coal value chain, but I didn’t want to play all my cards. Between the senior police officers and the SSA agents, they were quite a large group, and I wasn’t sure who I could trust.
In Mpumalanga, several cases relating to coal theft and the dumping of stock at dark sites were never prosecuted because a specific senior police officer had personally intervened. He had also allegedly ensured that the routes along which the syndicates transported cash were clear of any roadblocks.
On one occasion, some of the coal trucks took a different route than usual, via Middelburg, and ran into a routine police roadblock. The officers on the scene allegedly received a phone call from the Union Buildings asking them: “Don’t you have better things to do than to stop coal trucks? Let them go.”
So I had good reason not to give away too many details.
********
Following the Stage 6 load-shedding of December 2019, the SSA had launched an investigation into possible sabotage, the results of which Eskom still hadn’t received. Now the doctor (from SSA) was saying that the information we had uncovered was consistent with the SSA’s intelligence.
So why had nothing been done for two-and-a-half years? The official said something about a joint task team being established but then being derailed by the pandemic.
I wanted to say: 'Come on, guys, our country is burning, and you allow a virus to prevent you from acting on a key threat to national security?'
I knew that for the better part of two years, Covid-19 had been used as a get-out-of-jail-free card for anyone wishing to dodge accountability, but this was ridiculous.
I wanted to say: “Come on, guys, our country is burning, and you allow a virus to prevent you from acting on a key threat to national security?”
A dossier was assembled, but it was never shared with Eskom because a highly placed politician had said it should be given to him, and only him. Following the meeting of the presidential task team the previous day, the same politician had once again requested that all information be shared only with him.
Key information that could help Eskom and the security services to curtail crime was being quarantined and not shared with the national police commissioner, and hence not acted on.
One of the police officers said Eskom’s controls were insufficient. I completely agreed. I had received information from a trusted source that you could unload coal of any quality at Kusile for a bribe of R200,000.
What incentivised the syndicates to pay such a large amount? The biggest reason was price differential. Eskom pays almost R350 per tonne of coal. But coal that is in line with Eskom’s specifications could be exported at up to $320 per tonne, due to the Ukrainian war. The arbitrage is just too large and juicy for criminals to resist.
If you can take Eskom’s coal, export it, and pay someone to go and offload stones at Kusile for which you also get paid, your profit margins will be off the charts. For someone with no moral compass, the R200,000 is an excellent investment.
Now I can hear people saying: What are you doing with this information, De Ruyter? My answer is: What can I do with it? Where do I report it? The police? They mishandle even the simplest and most clear-cut cases that we present to them. The SSA? They’ve just admitted that they’ve been sitting on explosive information for three years without doing anything about it.
Should I tell the government? Well … senior government officials might be involved themselves. So, what should I do? One even runs the risk that the police may share crucial information with the syndicates. Their leaks could endanger the lives of whistleblowers.
What I did do was to tighten up our controls over coal quality. I was aghast to find gaping holes in our controls, with even the rudimentary ones in place being ridiculously easy to circumvent.
Despite repeated exhortations to gain control over coal, our single most important process variable, little progress was being made. My repeated questions to Snehal Nagar and his team in our primary energy division, responsible for buying coal, met with very detailed but ultimately unsatisfactory answers.
Frustrated, I took a walk to their offices in Megawatt Park, and it was like boarding the Mary Celeste — not a soul in sight. I picked up a supposedly confidential coal contract lying on a desk in an open-plan office, and requested the team to come to my office so that I could hand them the file — and a furious dressing down.
Eventually I resorted to my tried-and-tested weekly meeting with Snehal and the team, and we started making progress. New technology was deployed, weighbridges were calibrated and used as checks, coal quality management was improved, security was tightened and arrests followed.
So brazen were the crooks that soon after commencing with a project to install sophisticated load cell technology on coal trucks, one of the contractor’s senior managers reported being approached with a bribe.
Back at the Megawatt Park security meeting, Skhosana admitted that cases weren’t being pursued by detectives when they were reported. This is a general in the police force and he’s sitting there saying in effect: Yes, Eskom, you’re right, nothing is being done.
Skhosana’s overall tone had changed considerably since his disastrous presentation the previous day. I suspected some hard words had fallen. Like Masemola, he admitted intelligence failings. And on the rare occasion that good intelligence was received, it usually wasn’t acted on.
The next spy to speak certainly looked the part: he arrived dressed in a trench coat and polo neck. He said Eskom was a priority and that the SSA would improve its vetting processes. Bear in mind that my own vetting process had still not been finished.
I had been in the CEO position for more than two-and-a-half years, and they still didn’t know if I could be trusted with highly confidential information.
“People are reluctant to deal with political issues in an election year,” said the spy, referring to the upcoming ANC leadership election in December.
So, while you are experiencing crippling load-shedding, precipitated by sabotage and crime, your country’s national security agency is saying: Wait, it’s a bit politically sensitive, let’s stand back for the next six months until the ANC has elected its new leaders.
Can you imagine this happening in any other democracy?
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